Chapter 6: Accounting Application of Electronic Spreadsheet

This chapter shows how an electronic spreadsheet makes accounting work, from recording transactions to preparing final accounts, faster and more accurate. Its two opening sub-lessons introduce the spreadsheet and set out what you will be able to do by the end of the chapter.

The chapter opens with two sub-lessons. Introduction explains what an electronic spreadsheet is, a grid of rows and columns whose cells hold text, numbers and formulas, names common programs such as Microsoft Excel and Google Sheets, and shows why accountants use them to automate calculations, keep records and produce reports. Learning Objectives lists the six skills the chapter builds: understanding spreadsheet features, creating and formatting accounting worksheets, using functions for calculations, recording transactions and maintaining ledgers, preparing a trial balance and final accounts, and weighing the advantages and limitations of spreadsheets in accounting.

The opening of the chapter answers two questions: what is an electronic spreadsheet, and what should you be able to do with it in accounting?

1. Introduction. The first sub-lesson builds the basic picture:

• A spreadsheet is an electronic worksheet made of rows, numbered 1, 2, 3 and so on, and columns, lettered A, B, C and so on. Each cell is identified by its column letter and row number, such as A1 or C5.
• A cell can hold a label (text), a value (a number) or a formula. A formula begins with an equals sign, for example =B2+C2 or =SUM(C2:C10), and is recalculated automatically whenever a figure it uses changes.
• In accounting, a journal or a ledger can be laid out in columns such as Date, Particulars, Debit and Credit, with totals and balances worked out by formulas instead of by hand. If a ledger sheet lists debits in C2 to C10 and credits in D2 to D10, the formula =SUM(C2:C10)-SUM(D2:D10) gives the balance: a positive answer is a debit balance and a negative one a credit balance.
• Features such as formatting, sorting, filtering and charts help to organise financial data and present it clearly.

2. Learning Objectives. The second sub-lesson states what you should be able to do by the end of the chapter:

1. understand the basic features of an electronic spreadsheet;
2. create and format accounting worksheets;
3. use spreadsheet functions for accounting calculations;
4. record transactions and maintain ledgers;
5. prepare a trial balance and final accounts using spreadsheets;
6. appreciate the advantages and limitations of spreadsheets in accounting.

How the rest of the chapter follows. The later lessons take these objectives in order: an overview of the electronic spreadsheet and the features useful in accounting, common spreadsheet functions, recording accounting transactions, a worked ledger account, the trial balance, final accounts, and then the advantages and limitations of spreadsheets, followed by a summary, important terms and exercise questions.